Aug
19
As you all probably know credit unions typically provide much better interest rates on credit cards, loans, savings accounts and other financial services. This is due to the fact that credit unions are privately owned and controlled by their members rather than shareholders like most large banks. Credit unions also don’t have huge marketing expenses like most of the major banks do, so again they can pass the savings on to members in form of better rates for their services. I personally make use of a great credit union here in the Seattle area and have not been disappointed with their products or services one bit.
So where does a credit union come into play with rebuilding your credit? There are two things that credit unions are great for–in addition to the regular checking, savings, and online bill pay services–that can absolutely help you rebuild your credit.
Secured Credit Card
A secured credit card is a credit card that is secured by a deposit at the bank or credit union. Typically a credit union will provide you with a credit line (on a Visa or Mastercard) equal to the amount of the deposit. Some of the larger banks who offer secured cards often grant a portion of your deposit as a credit line. In addition, may banks charge annual fees for these types of cards and the cards may not come with benefits like rental car insurance, fraud protection, price protection etc. Not all cards issues by a credit union will come fee-free or provide these benefits, so you should check with the credit unions in your area to ask about specific card benefits. The other benefit is that credit unions almost always report these cards to the major credit bureaus. This is critically important as a secured card can only help rebuild your credit if it is being reported to the credit bureaus. Another great benefit of obtaining these cards from a credit union is that credit unions typically charge interest rates much lower than large banks for a similar card. I am not advocating carrying a balance, but if you need to from time to time, this can be a money saver. Finally, as you establish a solid 12-18 months of payment history, credit unions will typically examine your credit situation to see if they can offer you a unsecured credit line. This again will only help your credit score as your rebuild your credit profile.
Share Secured Loan
A share secured loan is essentially the same thing a secured credit card. It is a loan that is secured by your deposit at the credit union. Again, your loan is typically 100% of the amount deposited with the credit union. The interest rates are generally 2-3% above the interest rate for deposit accounts. So, my credit union pays 0.75% on deposit (checking) accounts and they charge 3% above that rate for share secured loans; that is a pretty good deal. Having a installment loan like this can improve your credit score assuming you pay the loan on-time because the new credit scoring models look for a mix of installment (loan) and revolving debt (credit cards). If you go down this road, you should choose a loan of no less than $500 and repayment over no less than 12 months. Otherwise, the loan is unlikely to have an impact on your credit score. You can simply the proceeds of the loan into your checking account and repay it that way. A $1,000 loan, repaid over 12 months at 3% would have a payment of $84.69 and only cost you about $17.00 in interest. A cheap and effective way to help rebuild your credit. Again, ask the individual credit union if they will report the loan to the credit bureaus as this is critically important.
If you choose to make use of any of these two tools, let me recap the critical things you should be asking of your credit union:
- Will this be reported to the credit bureau?
- What is the interest rate?
- Is there a repayment penalty for the loan?
- What other fees are associated with the credit card?
- Can I be considered for an unsecured credit card in the future?
- Does the card come with benefits like price protection, car rental insurance, etc?
If you are having trouble finding a credit union in you are, you can check out FindACreditUnion.com
Aug
16
I’ve been gone from the blog for quite some time now despite repeated attempts and promises to start posting on a regular basis and update the Debt-O-Meter. Yes, I have let you all down and it showed in many of the comments from the prior posts. So, the question is why did I stop posting and what became of my quest to retire my credit card debt?
First and foremost, the debt started to become a constant reminder of the financial situation that I put myself in over the course of the past 10 years or so. As everyone who is or has been in debt (not necessarily this substantial) knows the stress of being in debt can be somewhat overwhelming at times. There have been many times over the past few months where I was completely overwhelmed by my debt and frankly the blog, although designed to be therapeutic in nature was proving to be more of a stressor. I did continue to make progress in paying off the debt as witnessed by the Debt-O-Meter, so rest assured I didn’t “fall off the wagon” over the past few months. In fact, I have been dealing aggressively with the various collection agencies who have taken stabs at my American Express debt. In the process, I have learned a tremendous amount about the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA) and I plan on sharing my knowledge with you all.
I have thought long and hard about whether to even continue the blog given what it has represented for me in the past. Frankly, there have been many moments over the past few weeks where I thought about stepping away and just letting my journey and debt repayment plan work itself out over the next few years. This would clearly be the easiest choice and I wouldn’t have to worry about posts, hosting, comments attacking my character, my parenting or my financial wisdom. That said, reading comments like “this blog is dead” truly made me feel bad about abandoning the site. I couldn’t come back, however, until I was confident I had a plan in place that would allow me to bring the readers the content they want AND have the blog provide me what I need; I need the blog to be a healthy outlet!
- Well I’m happy to say I’m back and I have plan to satisfy both the readers and myself. Without further ado:
- I will make a good faith effort to post on a daily basis several times per week
- Debt Repayment will NOT be the subject of every post
- My financial related posts will include tips to save, everyday finance management ,budgets, debt repayment strategies, credit report/scores basics and tips and just about any other financial subject where I have an opinion
- Debt-O-Meter will be updated on the 20th of every month
- I will be merging my other site Pound By Pound (which has also been abandoned) into this site so I will be adding the Pound-O-Meter to the site and will post occasionally about my journey to be physically fit (in addition to fiscally fit)
- If I am unable to follow this plan over the next 60 days, I will, with great regret retire this site and head off into credit card debt heaven
I’m confident having the blog not focus SOLELY on my specific debt repayment will keep me motivated, keep readers coming back (and discovering the site) and will hopefully get the attention of some of my fellow bloggers who have been very supportive and inspirational in the past.
Finally, if any of you loyal–and I do mean loyal–readers out there have ANY suggestions as to what you’d like me to post about or other pieces of info you would like revealed regarding my financial life, please let me know. I take all suggestions seriously and those that are feasible will certainly be incorporated into the site. I look forward to resuming this journey with you all and I hope you will give me another chance to share it with you.
–Fellowes
May
20
To all those folks who have been clamoring for an update, I apologize for not being back often. As I mentioned in my comment in a prior post, technical difficulties and a very busy and hectic work life have kept me away from the site.
That said, due to popular demand and my frustrating but seemingly effective attempts to overcome technical issues, I’m happy to provide an update to the Debt-O-Meter. I’ve knocked down almost $2K in debt over the past two months and I’m just under the 10K mark. With the exception of American Express, I now have all my former accounts on fixed monthly payments which total $953/month. I am in the process of establishing an emergency fund and once that is sufficiently funded I will start throwing even more money toward the debt. My goal over the next twelve months is to retire $17K in credit card debt, with a stretch goal of $20K. I have a few things in the pipeline that should allow me to do; more details on that to follow. Assuming this post remains stable on the site over the next 24 hours, look for some new posts from me…finally!
Mar
16
I have finally updated the Debt-O-Meter to reflect where I am as of today. I’ve done pretty well but not as well I would have liked. Over the course of the past months I must admit I used my credit cards twice to pay for trips to visit my daughter out of state. Do I regret that….absolutely not. By the end of April, I should be very close to having paid of nearly 10K in credit card debt, which is realistically about where I expected to be. Over the next 12 months, I am going to be making a very significant effort to pay down the debt as quickly as possible, while doing things like saving for retirement and building an emergency fund. Nearly all of my debt is at 0% interest so it doesn’t make much sense to me to divert money I would otherwise use for retirement or an emergency fund to paying off 0% credit card debt. Thoughts?
Feb
25
I’ve been meaning to put up this post for weeks now, so my apologies for giving people a late start. A few weeks ago I was contacted by the nice folks at Mint.com–a site which I highly recommend if you don’t like Quicken or Money–about a contest they are running which I know will be of interest to many of my readers.
The specifics of the contest can be found here, but the gist is that Mint.com will select the best video/best text submission from folks who detail their holiday overspending. The winner will get their credit card bills as of December 31st, 2007 (up to 5K) paid in full. The best part is that you DON’T have to be a user of Min in order to enter or win the contest. Since a majority of folks who answered my weekly poll used credit cards to pay for their holiday spending, surely there should be some entries coming from my readers.
The deadline for submitting an entry is March 15th so there is still plenty of time to try and win. In addition to winning the 5K, you will also get free, personalized credit counseling. It costs nothing to enter so I think I too will give it a try. I wonder if my holiday overspending from years past, which I am probably still paying for still qualifies for the contest 
Feb
24
Over the past few months I haven’t been nearly as enthusiastic about or inspired by my blog. This has been reflected in the lack of regular posting and somewhat more practical, dry posts. So I’ve been trying to revisit what initially inspired me to blog about my debt, particularly Tricia’s Blogging Away Debt.
In retrospect, my desire to blog came from my desire to feel a little bit better about my own situation. I hoped to find others in the same situation and try and gain some strength from knowing that it is possible to dig your way out of tremendous debt. In the months leading up to the start of my blog I felt very alone, having just gone through a divorce, struggling with bipolar and having to face a seemingly insurmountable amount of debt. For me the blog was a way to anonymously connect with others, at least that is what I had hoped.
I think I have strayed from my mission a bit. While I have had some very useful posts over the course of the past 6 months or so, there have been many posts that are more of a play-by-play of my daily struggles with creditors, particularly AMEX. To those readers who have found some of my advice and resources useful for your own situations, I thank you for that. I feel that I have become somewhat disconnected with my readers, however.
When I started reading other personal finance and debt blogs, one of the things I remember thinking was that the good ones had a nice conversational tone with the readers. These blogs give practical advice on some days, emotional reactions on others and reported the simple ‘meat & potatoes’ of life on others. This is exactly what drew me to these blogs in the first place.
Somewhere along the way, probably shortly after getting a lawyer involved to handle the AMEX negotiations, the tones of my posts became somewhat bitter, dry in tone, and in some cases simply a restatement of the facts, leaving nothing for my readers to actually connect with. I recognize this and for the few people who left me feedback on this, I’m here to tell you I hear you.
Being in debt isn’t fun and frankly blogging about the debt–at least specifically–ALL the time isn’t much fun either. I think again, this is why I haven’t been posting regularly to the blog. It simply hasn’t been fun.
Well, going forward I plan to take on a much more conversational tone with the readers. I won’t constantly offer up ways to negotiate with creditors, ask for payment plans or report on what I’m trying to offer AMEX in terms of a debt settlement. What I will do is tell you more about the day to day life or someone living in debt. What is it like to date while in debt? Save for retirement while in debt? Save my daughter’s college while in debt? What does debt do to me emotionally?
CALL TO READERS: What topics would you like to hear more about? Please make your suggestions by commenting here or contacting me through my feedback form. I really want some solid user input.
Feb
8
As I mentioned in an earlier post, the lawyer that had been handling my account was dropped my from legal plan and the case was closed. I decided not to go find another attorney and try and tackle things on my own; I will find an attorney again if I feel it is necessary.
In the meantime, I came across a site that I have found very useful for things ranging from disputing info on your credit report, negotiating with creditors and collection agencies and getting negative items removed from your credit report. The site is called CreditInfoCenter.com.
I should caution that why this site does have some useful information, it should not be construed as legal advice. If you find yourself in a debt situation that is very complicated you should probably try and find an attorney or consult with an accredited Consumer Credit Counseling organization. That said, if you are unable to afford an attorney this site provides some good self-help tools and letters.
Feb
6
I received an email from a reader who finds himself in the same situation with American Express as I found myself in several months ago. I had significant balances with American Express which I knew I wouldn’t be able to keep up with given they were charging me 30% interest each month. Like this loyal reader, I too tried to get American Express to work with me on a reasonable payment plan with reasonable interest. As I mentioned in prior posts about my negotiations with American Express, you cannot reason with the unreasonable.
I had three accounts that were officially charged-off by American Express in 2007:
- AMEX Blue ~12K Balance
- AMEX Gold ~8.7K Balance
- AMEX Green ~1.8K Balance
In early December, the negotiations with the collection agencies that had been handling the AMEX accounts had stopped. The lawyer that I had been using–a member of my group legal plan–was dropped from the plan and my case was closed. Since then I have continued to receive phone calls–albeit less frequently–and numerous letters from the collection agency than is handling the AMEX Gold and AMEX Green accounts. The AMEX Blue account actually went back to AMEX.
In mid January, I received an offer from American Express to settle the balance on the Blue Account for 55% of the original balance. The offer came with several important caveats:
- Should I ever apply for an personal AMEX card again, any amount that was ‘forgiven’ would have to be repaid for the application to be considered
- Should I ever apply for an corporate AMEX card again, any amount that was ‘forgiven’ would have to be repaid for the application to be considered
From my perspective the only possible problem would be getting an AMEX corporate card. I currently have one with my current employer, an employer which I frankly don’t see myself leaving anytime soon. That said, there is always the possibility I’d need to take another job and apply for an AMEX corporate card. There are other corporate card providers, but AMEX seems to dominate that marketplace.
The other problem, quite frankly is that I don’t have $6,500 sitting around to send to AMEX, so a lump sum debt settlement isn’t in the cards. From my perspective, I’m left with the following options:
1) Repay everything in full over time, with payments that fit my budget. The accounts have already charged off so frankly AMEX would be happy to collect something each month on these account. Should I decide to head down this route, I will ask that upon payment in full, AMEX remove the charge-off entry from my credit report. The removal of the charge-off would likely be a deal breaker for me in this scenario, particularly given how inflexible they have been to date.
2) Settle for an amount less that the amount owed. Again, I would ask that the charge-off entry be removed from my credit report. If they didn’t agree to this, I’d ask that the charge-off be reported as ‘Paid In Full’ when settled for a smaller amount. This is probably the more likely scenario and until confronted with having to repay any forgiven amount, I’d just be done with AMEX and never do business with them again from a personal perspective.
3) Do nothing. Given the accounts are already listed as charged-off, my credit score has likely taken a big hit already. In the State of Washington, the statute of limitations for creditors to pursue collection is 3 years. After that, they cannot come after you BUT the negative credit information will remain for a total of 7 years. This is an undesirable choice because the creditors could sue me, something that is feasible given the amount of the debt. I don’t recommend folks take this approach.
Ethically I would like to try Option #1 and given my tight budget, this may be the only possibility for now. That said, if I could get the charge-off entry removed using Option #2, I would figure out a way to make this happen. I’m willing to take a calculated risk that the next time I would need to apply for an AMEX Corporate Card, I will be in a financial position that would allow me to simply repay anything that was ‘forgiven’.
I’ll keep everyone posted as I determine the best course of action. Now that the account has charged-off, AMEX does indeed seem a lot more willing to work with me to get things resolved. Of course, of monumental importance to me, will be getting those charge-offs removed from my credit report. Charge-offs are about the worst mark, with the potential exception being bankruptcy, that you can have, particularly if the charge-offs are recent.
Feb
5
I’ve gotten a few emails over the past few months from loyal readers who were asking “Now that you are in all this debt, what is your credit score?” Well, my answer, at least for now is I don’t know and I don’t care, at least for now. At first blush this might seem like a somewhat reckless answer, but it frankly is the truth. Clearly–given my current level of debt–I will not be applying for a credit card anytime soon. I have two cards with $1000 limits that currently have a zero balance that I can use in the case of emergencies. Given I sold my car and have no plans in the near future to buy another one, I will not be applying for a car loan anytime soon. The only potential snag I may run into is if and when I decide to move out of my current apartment (something I am seriously considering). Luckily I have a well paying, stable job with one of the most stable and well-respected companies in the area, so I should be able to convince a potential landlord that I can pay my rent, particularly if that rent is less than what I am paying today.
In the meantime, I am doing all the things that should, in theory, improve my credit score, albeit over time. I am paying down my debts, most of which are at 0% interest as quickly as I can at the moment; yes I’m working to provide an accurate update on the Debt-O-Meter. I’m not taking on any additional debts or loans at the moment and I’m making sure that my payments are being made on-time.
Admittedly there is also a psychological element to not checking my credit score right now. Yes, I know my credit sucks. Yes, I know my credit score sucks. Pulling my score quite frankly would make me feel worse about everything that I have done over the past few years financially. I would much rather wait until some time has passed and my accounts are re-aged (something many creditors have agreed to do) and I have paid down a good chunk of debt; my credit score should be higher at the end of 2008.
That said, I will be checking my credit reports, now that things are settling down in terms of accounts being sent to collection and then back to the original creditor. In fact, I will have a lengthy update with regard to the AMEX situation as things have changed significantly on that front. Everyone is entitled to check their credit report for free, once per year. You can go to AnnualCreditReport.com to request your free copy of your TransUnion, Equifax and Experian credit reports. You can order and view your report online or you order your reports by mail. Mail requests typically take several weeks for processing and mail time. Each year I have compared all three reports I have found errors or inconsistencies between the different bureaus so it makes sense to check all three.
Stay tuned for a Debt-O-Meter update as well as an update on AMEX.
Feb
1
Last week, I was contacted by a documentary photographer named Kelly Shimoda asked if I were willing to post some information about an upcoming project she is working on related to debt. I agreed and without further ado, here is some more detail in Kelly’s own words:
I am a documentary photographer and am doing a project on debt in this country to try to shed light on the difficulties of living on today’s working and middle class salaries - as well as to shed light on some of the problems with the credit card/lending industry. I am looking to connect with middle class people and families who find it difficult to live without debt - whether they need the help of credit cards or whether they are in debt from medical bills, paying for school, etc.
I know from personal experience that debt isn’t always something you want to share with the world so anyone who participates in the project can remain anonymous. I am very sensitive to the privacy concerns that people may have when they talk to me about their debt situations. In fact, my idea is to photograph things that represent people’s debt - but not necessarily the people themselves (e.g. groceries, cars, medical bills, school loans, clothes, etc… anything you have gone into debt to pay for).As I am based in New York City, I am particularly looking to meet people in the NYC metro area; although I’d love to hear from you wherever you are. If you would like to see more of my work to get an idea of my style, you can look at my website: www.kellyshimoda.com If you think you might be interested in participating - or just hearing more about the project - please email me at: debtphotoproject “at” gmail “dot” com Thanks very much!
Given Kelly’s idea to focus more on the things that represent their debt, i.e. the purchases made on maxed out credit cards, I hope many of you in the NYC area will participate. I plan on telling Kelly I’m willing to participate, but given my location on the left coast, this may make things difficult.
